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CEOs gloomier than public on U.S. economy
By Jonathan Stempel
August 13, 2008

NEW YORK (Reuters) - The vast majority of chief executives are gloomier about U.S. economic prospects than a year earlier, and top company officials have become more downbeat than the public at large, according to a survey released on Wednesday.

Some 90 percent of chief executives described U.S. economic conditions as fair or poor, up from 16 percent a year earlier, according to NYSE Euronext's (NYX.N: Quote, Profile, Research, Stock Buzz)(NYX.PA: Quote, Profile, Research, Stock Buzz) fourth annual CEO survey, "Managing During Economic Turbulence."

The survey was conducted in March, when housing and credit conditions were better than they are now. Just 83 percent of U.S. adults polled at that time felt the economy wasn't in good shape.

The survey included 184 CEOs from the United States and 70 from other countries. Sixty percent of respondents run companies with market values of $1 billion or more.

Americans in general soured on the economy sooner than many corporate chiefs. Last year, 63 percent of adults thought conditions were fair or poor, compared with 16 percent of CEOs.

A gloomy outlook may bode ill for capital spending and job growth at a time when housing prices are falling, unemployment is rising, oil prices remain near record highs, and many Americans say they feel like the economy is in recession.

"One of the most significant pressures that companies face now is weak domestic demand," Abiel Reinhart, an economist at JPMorgan Chase & Co, said in an interview.

"Consumers are under pressure from job losses, declines in wages after the effects of inflation, and lower household wealth resulting from weakness in equity prices and declines in home prices," he said. "Weak domestic demand sets up a situation where companies may need to lower production. Indeed, we've seen lower inventories as companies reposition themselves for a more difficult environment."

Reinhart said he wouldn't expect CEOs to feel much different now than in March because many of the same economic themes persist.

Andrew Liveris, the CEO of Dow Chemical Co (DOW.N: Quote, Profile, Research, Stock Buzz), told the survey that there was great economic uncertainty.

"The U.S. now faces the terrible combination of high and rising commodity prices -- inflation -- with low demand," Liveris said. "It's a situation we've not seen in the U.S. since the 1970s, and it makes for tremendous uncertainty."

According to the survey, 62 percent of CEOs expect to spend more in 2009 on energy, 58 percent see higher budgets for technology, and 55 percent plan to spend more on raw materials.

In contrast, just 49 percent expect higher costs for health care and capital expenses, and only about 43 percent expect higher pay for workers below the managerial level, the survey said.

The executives were also asked what advice they would give to the next U.S. president.

Twenty-six percent would urge the president to hold the line on taxes, while 24 percent would recommend limited or reduced regulation, and 19 percent would favor free trade.

Improving financial sector governance was mentioned by just 4 percent, and ending the Iraq war by 3 percent.

(Editing by Jeffrey Benkoe)

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